Looking at the Fed's Move to Hold Rates Steady

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... the the ... the acting is Prescott has been watching ... Winnie continue on the OS is ... a quick look at the markets now let let's see what's happening on the of the Titans industrial average ... Tom ... Baroness of dollars in the snow off it went up substantially after the ... the announcement and the press conference I'm as the mass back ... some of ... that and the tech heavy ... aam ... and the SB five hundred to pick stocks index ... we've got ... James Keenan of BlackRock empty moment in the corporate ... lending market and to ... be a Lipschutz package and double to do that thank you very much for joining us ... the chance to come ... let's stick with the area that you you you look at aam ... was this life upon the dust this in in the in the corporate space ... but it's it's you ... the thing about high yield of bank loans their ... riskier assets name is really because they're easy tied to companies with more operational leverage or more financial stuff ... most of those companies are issuing shorter debt paper so there's less to ration risk ... with the market today announced the rest of interest rates rising was in capital that's basically what ... it is ... the majority of fixed income assets having to ration risk associated with ... high yield of one of the spread is the more credit Mr. taking which is can be more similar correlated to the equity markets up ... as does give the ... chairman talk about I mean the economy is improving there are still downside risk there but that everything is improving accommodative policy still remains ... um that's decreasing the risk and this is the most to me that downside risk probability downsides of ... covert to do better than means default rates around one a half percent high heels is still doing well on the guts of new emo mom thought there was this idea every play every week somebody sign ... that some markets in a bubble don't fight junk that it's a waste of time ... what what he said ... yes ... I realize that you're in the business day of any of it but the double ... hit of the blessed with a twenty seven zero but I think people look at ... on the IPO market and think of that historically Yeltsin and I think the misconception is ... the high yield market actually sets the seals the reality is ... economic environment inflation tax the yield curve ... and the risk premium above that ... is really what you tried to get that credit risk than ... mine ideal mark ... so today you still sing a five hundred over aam ... has five percentage points over ... the place Trade Center sent for high yield now remember in two thousand and seven ... you ... can't reach or six percent to an end and analyzed the I remember ... when you can actually gets money and assigning so it's it's not a don't fight the ... deal you listen to the press conference to aam OBC up of ... a wide variety of questions that ... are ... a few things struck me how ... was the credit score was critical to bring mine on lending from one of the issues that that the Fed wants to do with its one of my program ... and its low interest rates to stimulate lending ... Delta has been working right ... will he did say that he thought obviously during ... what would lead to the crisis to some degree certainly ... was excessive risk in mind especially mortgages people getting mortgages ... Ally is going to tell ... exactly ... and and I think he ... did mentioned Nike did make it with the potential mates long before the other way ... and then you know in reaction ... lending standards early for people trying to get mortgages ... have become too tight and no doubt ... that that makes it ... monetary policy to do very very stimulus stimulus policy to proceed ... with the fact ... that it's it's a roadblock ... nonetheless it was a common Michael Janney Montgomery ... Scott aam Italia has resigned that this this cutie this money printing ... easy dish to ... me now is an elite get filled up basically and as a prelude to war ... that it can do my pleasure to see you know it ... do you think that that aam that basically ... it's true that basically it's it's it's um what they can and that some doing Morris's to me was that on that ... but honestly tear down I mean you think you look at the evolution of of the posse from QE want only the QE three and ... certainly when you put money into the system when there's a high level of inflation Given the given negative real return on me and ... Kathy Sullivan to QE two Herald Sun oil prices were high gasoline prices were not ... in the household sector in the business sector slow ... and ... I think three three is a bit different in the sense that when the market wanted when the economy wanted to put new money into the system so still committed ... to protect against the downside ... but as he was in the confines of where the risk so if you don't think that they're all filled up and and and the oldest was overview of the reactions yet the conference I thought it could cope with struck me that was quite interesting one is that the law to report Friday given ... to ... set some parameters around the weak and strong jobs report lent to offset some rambles around when it meets the might ... use ... the eighty five billion a month of mortgage and Treasury by ... Aneel obviously he didn't give ... any specifics I think it's a couple things that thought was interesting this notion ... of thing every scene of this notion that ... if things continue to improve ... he would go way over Sunday trying to signal things for the market ... maybe they just reduce it ... and then if that proved an improvement somehow prove to be temporary ... and the economy will likely was weaker than that they could take it up again ... so that we haven't seen yet and that ... just didn't want so I thought was quite interesting to the recent possibility of something like this to the punch bowl write to me once the Punchbowl era of costly ... who who gradually takes away the transit applauding you don't you just take everybody out because the organ for prime time ... when is the isthe them on what he does the more I think he was implying that they would want it though so don't ... exactly look from eighty five billion to stop that they'd want some ... new ground so that they can try to try ... to fit it struck me ... Kimberly is trying to surprise the market ... value we communication ... of of much else of value the value we get very quietly ... and I think he was trying to end the year ... until something else is going to happen to frequent local from eighty point zero ... two can go ... down in Cali perhaps will begin if this ... growth ... spurt that Iran doesn't sustained tied to those twenty think building very quickly ... but I thought was quite interesting is that ... he ... I think he gets to displace ... that the with the considerable time ... between when this eighty five billion a month finally whose and win the actually ... tighten policy ... and reads the short-term interest rate from zero ... I think that's one because I like my own guess is that he doesn't want them or gets the same when this finally goes away ... that that's it we've gone to tighten site ... it's a it's an interesting point Jens ... he talked about Cyprus to which has been on everyone's mind lightweight any of it to me this site ... Tommy doesn't think of ... crime and Cyprus would affect the U S and many such ... unless it's catastrophic which represented a name won't affect us in the U S and unless it will move you did you think this I mean ... these are the sense that the economies of Cyprus itself as a small economy ... and it doesn't have a major impact even within Europe ... is the policy around that and the potential risk that that might mean something to ... the local Spanish banks of the Italian banks and we all know ... especially since two thousand and ten that the banking system in Europe is this time remember to ... be I think what is hiring a Santa type itself was not a problem with the house to watch the policy and does that create risk across the European system ... and ... and with that in one house response person the ECB in and as the Fed have to adjust the costs again I think I'm just very quickly on a point ... that he was going on the potential to compete in yesterday's big red grapes Cypress days ... that is contained within itself ... there's like no riskiness to calling ... the OpenTable rest of the rest of Europe puts it ... depositors in other European countries become concerned ... I think it becomes a bigger issue ... I thought in general ... the ... my own view was that he ... downplayed Cyprus at this point and talked about the fact that we don't ... know what it could still play on and therefore ... piece a couple of times ... then you know that it didn't ... while important are minor ... it's unlikely ... to affect the financial system or the U S ... economic growth will let soften up recently admitted that none of us on the Saturday one actually to get it to deposits text to read my friend watch Neil thank you very much dancing with the dominion debut on its new sub I'm Simon Qassam on that's the new sub special on the fat on the back to full with the new stock of a great afternoon ... I ... I ...